Trading results for 21 February 2025
It all started so well… A short week, positive market sentiment, indexes hitting records and corporate reporting which was in general the best for the past three years. Admittedly, this is something one can only dream of! However, investors remain indifferent to negative factors such as not entirely clear macro data on inflation, tariff chaos instigated by Trump and uncertainty over the plans of the U.S. President's Administration regarding cuts in government spending and the number of civil servants.
And, as is well known, the market participants’ disregard for large amounts of uncertainty always ends the same way – in a crash. And ultimately, we experienced it. Whether the market will be confined to the sell-off witnessed on Thursday and Friday remains unknown – next week will tell. But the fact that last Friday was the worst trading day of 2025 is indisputable.
The local trigger for the sell-off was, firstly, the publication on Thursday of weak earnings from retail giant Walmart (WMT, -2.50%), after which the company lost almost 7% of its market capitalisation and on the following day dropped by a further 2.5%. Secondly, data released on Friday showed that business activity in the U.S. fell to a 17-month low, reflecting growing concerns among businesses and consumers over the policy of the Trump administration. Thus, the S&P Global Services PMI unexpectedly dropped below the critical threshold of 50 points (49.7). In addition, data on existing home sales also proved to be worse than expected – 4.08 million against a forecast of 4.13 million.
But it should be noted that all this would not have caused such a negative reaction among market participants if it had not been for the prevailing sentiment that clearly indicated investors were looking to begin a ‘small profit taking’ (small, indeed?). The modest decline on Thursday escalated into a more widespread fall on Friday, affecting even more economic sectors and securities. Ultimately, the sell-off affected nearly everything except for the shares of companies producing essential goods in the Consumer Defensive sector.
The two-day sell-off was also reflected in the weekly results. At the sector level only one sector – Health Care – managed to stay afloat, gaining 0.2%. Shares of utility companies also remained above zero but a gain of 0.01% can hardly be called significant. However, the other nine sectors went into negative territory. In some of them the decline was quite considerable – the shares of companies operating in the communications services sector (Communication Services) and in the cyclical goods and services sector (Consumer Cyclical) lost on average more than 3% during the week (3.16% and 3.08 respectively). And the average losses of shares in the industrial and commodity companies exceeded 2.5% (2.64% and 2.62% respectively).
Certainly, the indexes also suffered even though at the beginning of the week they were reaching new all-time highs. The greatest losses were incurred by the Dow Jones (DJIA-30) and the NASDAQ Composite which dropped by 2.51%. The main benchmark of the U.S. market, the S&P 500 index, showed a more modest yet still significant decline – 1.66%. It should also be noted that it settled on its 200-day moving average, which in itself is a decent technical support. It is possible that it may be able to prevent further decline in the market.
The indexes in the ITS family also could not avoid the sell-off, although the consequences for them were less significant than for the American benchmarks. However, it is clearly premature to speak of a ‘catastrophe’. Nevertheless, the global market ITS World index fell by 0.44% over the week and the ITS Shariah index dropped by 1.02%.
According to last week’s results, special attention should be given to the global market ITS World index, which delivered the best performance and repeatedly reached a new ATH (All Time High). Even against the backdrop of the sell-off it ended the week with only a slight decline. The main factor that allowed the index to demonstrate such a confident dynamic was the growth of the Chinese market, in particular the shares of leading technology companies such as Baidu (BIDU), NetEase (NTES) and JD.com (JD).
Shares of the Chinese giant Alibaba (BABA) deserve special attention as they were in high demand among investors worldwide following the publication of the company’s quarterly report on Thursday. However, the rise in these shares began at the end of January when they emerged from more than a four-year decline and since then their value has increased by almost 80%. Thus, it is possible that the rise in the company’s share prices last week was the final one and a correction is clearly overdue, especially as the consensus forecast of leading analysts at ITS-ideas.kz currently indicates a limited potential for further growth – only 9.37%.
Overall, the past week was something of a wake-up call for investors. As it turned out, the situation is far from the clear skies that appeared evident at the beginning of the period. In the current conditions it is important to remain vigilant: the market is still characterised by high uncertainty and in the near future the direction of the ‘main move’ – the direction in which the market will move in the medium term – will probably be determined.